If you are looking to retire in the next six months and your assets not including your house are $300,000 to $500,000 for a single person and $500,000 to $650,000 for a couple you should read on it will improve income.

What is a Term Allocated Pension?

A term allocated pension is very similar to an allocated pension butit also offers social security and tax benefits. Term allocatedpensions are ‘complying income streams’ for pension and tax purposes,because people receive regular income payments, but generally cannottake out lump sums, at any time. On the other hand, people have theright to choose potentially higher-growth investment options, alonger-term for a pension than the standard life expectancy and to varyincome up or down 10 per cent from standard limits.

They also may entitle you to a 50% assets test exemption which may entitle you to a part age pension.

Here is how is works. At present if you are a couple who own yourown home and have combined income of less then $61,906 pa you can holdup to $516,500 in assets other then your home and qualify for a partage pension. However if you were to go over the $516,500 in assets youwould lose the age pension.

Your super is included in thecalculation for determining you’re the total amount of assets held. Soif you had $500,000 combined in super (being super in accumulationphase or Allocated Pension phone) and another $50,000 in cash you wouldnot qualify for the age pension. If you were to place this super in aTAP, only $250,000 (50% of $500,000) would be counted towards the totalassets and you would qualify for the age pension subject to you alsosatisfying the income test.

Why do I raise this now? As at the 20 September 2007 the new superrules will you will Abolition of the 50 per cent assets test exemptionfor complying income streams (TAP). However, all complying pensionscommenced between 20 September 2004 and 20September 2007 will retainthe 50% exemption from the assets test. Similarly, complying pensionspurchased prior to 20 September 2004 still retain 100% exemption.

So, if it sounds like you might fall into the classification actnow, do not leave it until September 2007 it will be to late by then.

Please note: The example detailed above is very brief anddoes not cover all of the issues in relation to TAP’s. For a personallook at how these may effect you please contact ABN AMRO Morgan’s Townsville on 07 4771 4577.